LATEST DEVELOPMENTS IN JURISDICTIONAL CYBERLAW FRANK J. CAVALIERE* TONI P. MULVANEY** I. INTRODUCTION Business law authors Frank Cross and Roger Miller 1 coined the term jurisdictional cyberlaw, declaring that Internet use has turned traditional jurisdictional jurisprudence on its head. If maintaining a web site subjects an individual or business firm to the power of each state's court system, then truly many lawyers will feel that the world is upside down. This revolutionary notion has been adopted in a limited number of cases. This article will review the various approaches recently taken by courts 2 to reconcile developing technology with traditional concepts of long-arm jurisdiction and fairness. II. CONSTITUTIONAL ISSUES The leading case on long-arm jurisdiction, International Shoe Co. v. Washington, 3 established that the exercise of jurisdiction over an out-of-state defendant must not offend "traditional notions of fair play and substantial justice." As developed in additional cases, personal jurisdiction over a nonresident defendant is considered permissible if: (1) the long-arm statute of the forum state asserts it; and (2) exercise of jurisdiction is consistent with due process under the United States Constitution. In several states these two requirements have been combined. In those states, the long-arm statutes have been broadly construed so that they are deemed to extend to the very limits of due process. 4 To legally assert personal jurisdiction over an out-of-state defendant under the due process clause and International Shoe, the defendant must have either: 1) a * Professor of Business Law, Lamar University ** Associate Professor of Business Law, Lamar University 1 FRANK CROSS & ROGER LEROY MILLER, THE LEGAL ENVIRONMENT OF BUSINESS 42 (1998). 2 This article is a follow-up to Frank J. Cavaliere & Toni P. Mulvaney, Recent Developments in Jurisdictional Cyberlaw, 10 S. L.J. 51 (2000). 3 326 U.S. 310 (1945). 4 See United States v. Ferrera, 54 F.3d 825, 828 (D.C. Cir. 1995); GTE News Media Service Inc. v. BellSouth Corp, 199 F.3d 1343, 1346 (D.C. Cir. 2000); Resnick v. Manfredy, 52 F.Supp.2d 462 (E.D. Pa. 1999) (describing 42 PA. CONS. STAT. 5322(b)). A typical reference to such co-extensive jurisdiction is contained in Archdiocese of St. Louis v. Internet Entertainment Group, Inc., 34 F.Supp.2d 1145 (E.D. Mo. 1999). Missouri's long-arm statute permits a Missouri court to exercise personal jurisdiction over a non-resident defendant where the cause of action asserted stems from the non-resident defendant's commission of a tortious act within this state. Missouri courts (state and federal) have liberally construed this statutory phrase to authorize long-arm jurisdiction over non-resident defendants to the fullest extent permissible under the Due Process Clause of the Fourteenth Amendment
132/ Vol. 11/Southern Law Journal substantial, continuous, and systematic presence in the forum state (general jurisdiction), or 2) minimum contacts with the forum state such that asserting jurisdiction does not offend the aforesaid traditional notions of fair play and substantial justice (specific jurisdiction). With respect to specific jurisdiction, the defendant must have fair warning that he or she may be haled into court in the forum state. Fair warning exists when the defendant has purposefully directed activities at the forum state and the litigation arose out of or was related to those activities. 5 III. THE REVOLUTIONARY APPROACH TO PERSONAL JURISDICTION The most controversial case expanding the concept of personal jurisdiction based upon the existence of a web site is Inset Systems, Inc. v. Instruction Set, Inc, 6 in which a Connecticut software company sued a Massachusetts computer company over an allegedly infringing domain name. The defendant s web page was passive, 7 but the defendant also used a nationwide 800 number that incorporated the Inset name. The court did not elaborate on whether the jurisdictional theory was based on general or specific grounds, but since the web site itself was the basis of the alleged infringing activity, it would seem obvious that this should be considered a specific jurisdiction case. 8 The court in Inset was impressed with the fact that a web page, "once posted on the Internet," unlike a television or radio advertisement, would be available twenty-four hours a day. This case now stands for the proposition that anyone with a web site should expect to be sued anywhere, and is said to represent the revolutionary concept of personal jurisdiction. 9 Inset greatly influenced the court in Mieczkowski v. Masco Corp., 10 a 1998 wrongful-death suit arising from a child's death in Texas in a bunk bed accident. The bed was manufactured in North Carolina and eventually found its way to Texas. The defendant had no office or employees in Texas, but had made 250 sales in Texas. The defendant had a web site with a live e-mail link. The U.S. District Court for the Eastern District of Texas held that the sales and the potential online contacts justified the exercise of personal jurisdiction under general jurisdiction principles. Commentators claim that the effect of this ruling, if it becomes widespread, would be that almost any company with a minimal presence on the web could be haled into court in a state where it does a 5 Intern l Star Registry v. Bowman-Haight Ventures, 1999 U.S. Dist. LEXIS 7009, 1999 W.L. 300284 (N.D. Ill. May 6, 1999). 6 937 F. Supp. 161 (D. Conn 1996). 7 Passive web sites present two-dimensional images without interactive elements such as e-mail links, online forms, discussion areas, and other functional elements. 8 Other cases alleging name confusion have given less weight to the unique element of an allegedly infringing web site, if the web site referred to a distant activity and chances for confusion were limited. See Mid City Bowling Lanes & Sports Palace Inc. v. Ivercrest Inc., 35 F. Supp. 2d 507 (E.D. La. 1999); Bensusan Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y. 1996); Pheasant Run v. Moyse, No. 98 C 4202, 1999 WL 58562 (N.D. Ill. 1999) (the assumption was that few residents of Illinois pop over to Ohio for dinner). Inset, however, dealt with domain name confusion between companies in the same general line of business in neighboring states. 9 STEVE D. IMPARL, INTERNET LAW: THE COMPLETE GUIDE I 2-24 (2000). 10 997 F. Supp. 782 (E.D. Texas 1998).
Fall 2001/Jurisdictional Cyberlaw/ 133 negligible amount of business. 11 widespread acceptance. This approach to general jurisdiction has not found IV. FIVE UN-REVOLUTIONARY APPROACHES Most courts and commentators have been uncomfortable with the revolutionary approach. Some have been downright contemptuous of it. 12 In trying to avoid the harsh affect of that approach, courts have adopted five different analytical schemes for dealing with Internet jurisdictional issues. A. THE EFFECTS TEST Calder v. Jones, 13 first enunciated the effects test. In Calder, the California court exercised long-arm jurisdiction over out-of-state defendants because California was the focal point of their intentional allegedly tortious conduct. The U.S. Supreme Court held that personal jurisdiction over two Florida defendants was proper in California on the basis of an article the defendants wrote for a national magazine, because California was the focal point both of the story and of the harm suffered. The defendants had purposely directed their activities toward California, and the damaging effects of their actions were felt there. 14 The Third Circuit Court of Appeals has interpreted Calder to require the following three findings: an intentional tort, the forum being the focal point of the plaintiff s harm, and the tort being expressly aimed at the forum. 15 In addition, the defendants should have known that the brunt of the injury caused by their acts would be felt in the forum state. 16 Merely because effects are felt in a particular state does not satisfy the Constitution's requirements. However, as the Fifth Circuit has stated: "the effects test is not a substitute for a nonresident's minimum contacts that demonstrate purposeful availment of the benefits of the forum state." 17 The effects test has been successfully applied in several web-inspired cases. 18 11 Mark A. Willard, Personal Jurisdiction in Internet Cases, Tech Law Center 4. 12 According to Steven D. Imparl, INTERNET LAW - THE COMPLETE GUIDE I 2-24 (2000), "The Inset Systems decision is a classic example of bad law, resulting from the court's failure to understand Internet technology and its failure to consider the bigger picture of Internet jurisdiction cases." 13 465 U.S. 783 (1984). 14 Id. at 788-89. 15 IMO Indus., Inc. v. Kiekart AG, 155 F.3d 254, 261 (3d Cir. 1998). 16 Id. 17 Allred v. Moore & Peterson, 117 F.3d 278, 286 (5th Cir. 1997), cert. denied, 118 S.Ct. 691, (1998). 18 See, Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316 (9 th Cir. 1998); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 420 (9th Cir. 1997).
134/ Vol. 11/Southern Law Journal B. THE INTERACTIVITY TEST A different approach, but one that has found much support in recent case law, is found in Cybersell Inc. v. Cybersell Inc. 19 In Cybersell, an Arizona company sued a Florida firm for name infringement. The court declined to exercise jurisdiction in Arizona since the web site was merely passive, and the defendant had done nothing to promote its web site to Arizona residents. The court noted that courts must look at the "level of interactivity and [the] commercial nature of the exchange of information that occurs on the [w]eb site to determine if sufficient contacts exist to warrant the exercise of jurisdiction." 20 Since this case, web site interactivity has become an important concept, because an interactive web site gives a plaintiff the ability to argue that the defendant took some meaningful act in the jurisdiction. C. COMBINATION OF FACTORS A number of cases have turned on the confluence of Internet and non-internet-related contacts with the forum state to find personal jurisdiction. One high profile case that involved such a combination of factors involved President Bill Clinton s assistant, Sidney Blumenthal, and Internet alternative news hound Matt Drudge. Blumenthal was offended by comments made by Drudge on his web site, the Drudge Report. 21 The United States District Court for the District of Columbia held that it had personal jurisdiction over Drudge, a California resident. 22 The court came to its conclusion based partly upon the fact that Drudge operated an "interactive web site" that both allowed for e-mail and solicited money and news contributions. This rather low level of interactivity, however, did not distinguish this case from run-of-the-mill passive site cases. In fact,. Drudge would by this approach be subject to the courts of every state. The court went on, however, to point out that Drudge had traveled to the District of Columbia to give an interview to promote the Drudge Report, and that D.C. residents had supplied him with information for his site. The Blumenthal case is representative of the struggle over whether to preserve traditional concepts of jurisdiction in web site cases, as opposed to the idea that the web is such an extraordinary medium that it deserves a more radical treatment based upon the idea that a web site, no matter how passive, subjects its operator to the jurisdiction of courts everywhere. D. THE SPECTRUM APPROACH The ZippoMfg. Co. v. Zippo Dot Com, Inc. 23 decision arrayed Internet web sites into a spectrum consisting of three areas. At one end are situations in which a defendant 19 130 F.3d 414 (9th Cir. 1997). 20 Id. at 418. 21 The web site can be found at http://www.drudgereport.com. 22 992 F. Supp. 44 (D.D.C. 1998). 23 952 F. Supp. 1119 (W.D.Pa 1997).
Fall 2001/Jurisdictional Cyberlaw/ 135 "clearly does business over the Internet by entering into contracts with residents of other states which involve the knowing and repeated transmission of computer files over the Internet." In such a situation, the exercise of personal jurisdiction is proper. At the other extreme are situations where a defendant merely establishes a passive web site that does nothing more than advertise on the Internet. Passive web sites, according to the Zippo case, are insufficient to confer personal jurisdiction, despite the contrary holding in the much criticized Inset case. Web sites in the middle of the spectrum allow users to exchange information with a host computer, and the level of interactivity and commercial nature of the exchange of information that occurs on the web site determine the jurisdictional issue. E. THE STREAM OF COMMERCE THEORY In the case of World-Wide Volkswagen Corporation v. Woodson 24 the ''minimum contacts'' test denied the assertion of jurisdiction by Oklahoma over two New York defendant corporations that did no business in Oklahoma. Plaintiffs suffered personal injuries in Oklahoma in an accident allegedly caused by defects in their car, which they had purchased earlier in their home state of New York. They were injured on their way to their new home in Arizona. Defendants were the automobile retailer and its wholesaler. The plaintiff s unilateral act of driving through Oklahoma was held to be insufficient to create sufficient minimum contacts. The United States Supreme Court applied a fairness test based on foreseeability on the part of the defendants that they could be haled into court in Oklahoma. It was foreseeable that the car might be driven through Oklahoma, but that was not sufficient, because jurisdiction is proper in such a case only if ''the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there.'' 25 According to the Court, a defendant must purposefully avail itself of the privilege of conducting activities within the forum state, which requires, at a minimum that it deliver ''its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum State.'' 26 This approach was followed in Decker v. Circus Circus Hotel, 27 in which the plaintiffs filed suit in New Jersey federal district court alleging they had received physical injury in Nevada due to the alleged negligent condition of defendant s Las Vegas casino. Circus Circus maintains a web site that permits users to reserve a room, an obvious commercial activity. By making reservations available on the Internet, the defendants placed their hotel and its services into an endless stream of commerce. In this case, however, the defendant s Internet site contained a forum selection clause stating that by making reservations over the Internet, customers agreed to have their disputes settled in Nevada state and federal courts. The court concluded that this clause should be enforced. 28 24 444 U.S. 286, 297 (1980). 25 Id. at 297. 26 Id. at 298. 27 49 F. Supp. 2d 743 (D.N.J. 1999). 28 See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-84 (1991)(stating A clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits
136/ Vol. 11/Southern Law Journal V. MAJOR CASES EXTENDING JURISDICTION TO THE OUTER LIMITS 29 A. DEFAMATION/WORKPLACE HARASSMENT/ SPECIFIC JURISDICTION UPHELD Blakey v. Continental Airlines, Inc. 30 has been called a first-of-its-kind decision with regard to the New Jersey court s ruling that employers can be liable in certain circumstances for sexual harassment and retaliation that occurs on a work-related Internet bulletin board. 31 In this case, a female airline pilot sued her employer and several other employees in New Jersey state court over allegedly libelous comments contained on an electronic bulletin board operated for Continental Airlines employees by Compuserve. The New Jersey Supreme Court ruled that when an employer knows or should know that its employees are using a work-related Internet chat group or bulletin board to harass a co-employee, the employer has an obligation to stop the harassment. If the employer does not stop the harassment, the employer might have to pay damages to the harassed employee even if none of the harassment took place on the employer s physical premises. The court said that if cyberspace is used for corporate purposes, defamatory retaliatory harassment through that medium becomes part of the workplace for purposes of the Law Against Discrimination (LAD). This case is a groundbreaking decision in hostile work environment cases that, if followed by other courts, could obligate employers to monitor Internet chat rooms and bulletin boards that they know their employees use to exchange information about the workplace. 32 The issue of jurisdiction is equally as thorny as the merits of the case. While most courts around the country have been especially careful not to allow the immediacy of cyberspace contact to translate into sweeping jurisdiction for any seeming harm coming across a modem wire, the New Jersey Supreme Court seems to have gone the extra mile to protect a plaintiff under the state s exceptionally broad Law Against Discrimination statute. 33 In this case, the state Supreme Court was faced with an out-of-state plaintiff who had an active Title VII Civil Rights suit pending against Continental Airlines in Newark federal court. She brought an LAD (Law Against Discrimination) claim under New Jersey state law for defamatory retaliatory harassment against her allegedly trashtalking, out-of-state colleagues who criticized her qualifications and her filing of the federal lawsuit. The New Jersey appellate court refused to exercise jurisdiction under the International Shoe test and concluded the following: arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions. ). 29 The following four cases are examples in which courts that have extended the exercise of personal jurisdiction based on minimum contacts to the constitutional limit, and perhaps beyond. 30 2000 N.J. LEXIS 650, 164 N.J. 38, 751 A.2d 538 (N.J. Sup. Ct. 2000) 31 New Jersey Court Holds Employer Liable for Sexual Harassment and Retaliation that Occurred in a Work-Related Online Chat Grou, available at www.nolo.com/update (Dec. 14, 2000). 32 Id. 33 Daphne Eviatar, Cyberharassment: Sticks and Stones Hurt Online, Too, available at http://www.law.com. (Aug. 2000).
Fall 2001/Jurisdictional Cyberlaw/ 137 [w]e have located no case in which a court has found personal jurisdiction over a non-resident defendant for allegedly defamatory remarks communicated electronically when the plaintiff did not reside in the forum state, plaintiff s employment was not based on the forum state, and the defendant s electronically transmitted remarks were not specifically targeted at the forum state. Indeed to do so would go beyond the limits of due process. 34 The New Jersey Supreme Court disagreed, stating [I]f the pilots statements were published with knowledge or purpose of causing harm to Blakey in New Jersey, minimum contacts existed to support jurisdiction. 35 In applying the effects test to the facts of this case, the New Jersey Supreme Court reasoned that the means by which a message is communicated is not as important as the quality of the contact and said it would be a paradox if electronic communications, with their instantaneous messaging would lessen the jurisdictional power of a state. 36 The court said statements capable of a defamatory meaning and published with knowledge or purpose of causing harm to plaintiff in the pursuit of her civil rights within New Jersey amounted to intentional contacts within the forum which would satisfy the minimum contracts requirement of International Shoe. The court stated, [t]he effect of retaliatory falsehoods on [Blakey] could reasonably influence the anti-discrimination policies of the forum by deterring [Blakey s] resolve. 37 The case was remanded to determine whether the defendants knew at the time of their defamatory statements that plaintiff was actually pursuing this action in New Jersey and whether they knew their messages would be published in the forum. Blakey remains a tough policy statement that the courts of New Jersey will protect plaintiffs, even non-resident ones, from tortious attacks that originate from out of state when the effects are felt in New Jersey. Here, however, the court s interest may be more compelling in protecting the integrity of the state s LAD statute than in expanding personal jurisdiction. 38 B. TRADEMARK/COPYRIGHT INFRINGEMENT COUPLED WITH DERIVING SUBSTANTIAL INCOME FROM INTERSTATE COMMERCE If you allegedly cause harm to the National Football League (NFL), can you constitutionally be haled into any court in the nation? Or perhaps any forum with an NFL team? In National Football League v. Miller, 39 the defendant, Ken Miller is a California resident who maintains a web site registered as nfltoday.com. The primary income derived from the operation of this site was from advertising, and not from the sale of products. The ads enabled visitors to contact an advertiser directly by simply clicking on an ad banner or link. Advertisers included entities with which the visitors can place sports bets. The web site also provided information about sporting events and was 34 322 N.J.Super. 187, 205 (N.J. Super. Ct. App. Div. 1999). 35 164 N.J. at 58. 36 Id. at 62. 37 Id. at 70. 38 Bruce S. Rosen, Dot-Com Jurisdiction: Blakey s Tortuous Path available at http://www.law.com (Aug. 11, 2000). 39 No. 99 Civ 11846 (S.D.N.Y. 2000).
138/ Vol. 11/Southern Law Journal designed so that a visitor could click on a hyperlink and connect to the official NFL site. 40 The NFL sued Miller in New York alleging that Miller used NFL trademarks and copyrighted materials without permission and that by linking the NFL s trademarks to gambling activity Miller caused damage to the NFL in New York. Affidavits submitted by the NFL indicated that the defendant derived substantial income from interstate commerce, an element of jurisdiction under New York s long-arm statute regarding commission of a tort outside the state. 41 Judge John S. Martin ruled that jurisdiction was proper in New York even though the alleged trademark and copyright infringements occurred in California. Noting that the mere maintenance of a web site in a distant state that was visited by people in New York did not subject defendant to jurisdiction in New York, Judge Martin found that because the defendant earned substantial income from interstate commerce, he was subject to the jurisdiction of the courts in other states. 42 The court, in upholding jurisdiction over this non-resident defendant, seemed to apply the rationale of the effects test, saying that Miller had to recognize that since the site targeted NFL fans and there were two major NFL teams connected to New York, it was likely that his site would ultimately appear on thousands of computer screens in New York. Moreover, Miller must also have recognized that by using the NFL mark to attract people to a site that could link them to an electronic bookie, he could significantly damage the image of the NFL and its marketing efforts in New York. Therefore, since Miller apparently profited substantially from activity that damaged the NFL in New York, jurisdiction in the New York court was constitutional. The facts of this case are much more tenuous on the issue of whether the defendant purposefully directed his activities toward the forum state and could foresee the damage resulting there than they were in Calder v. Jones and its progeny. Those cases involved intentional torts focused at the plaintiff in the forum state. Here the defendant s web site operated the same in every state. In addition, the effects test is not a substitute for a nonresident s minimum contacts that demonstrate purposeful availment of the benefits of the forum state. 43 The Miller case appears to extend personal jurisdiction to cases in which operators of web sites derive revenues from advertisements viewed by people living in remote states. Thus, it defies the reasoning of the interactivity test, which requires not only a level of interactivity greater than a passive, linking web site, but also a commercial nature to the exchange of information that occurs on the web site. However, it is important to remember that merely generating revenue was not the main basis of the court s ruling. The court focused on the tort that was committed the alleged infringement of trademarks and copyrights coupled with the revenue the defendant allegedly earned from this infringement. Accordingly, the approach used in this case is a combination of factors whereby the court seeks to preserve traditional 40 The official NFL web site can be found at http:www.nfl.com. 41 N.Y. C.P.L.R. 302 (a) 3 (ii) allows jurisdiction over a non-resident who commits an out-of-state tort it the defendant expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate commerce. 42 No. 99, Civ. 11846 (S.D.N.Y. 2000). 43 Allred v. Moore & Peterson, 117 F.3d 278, 286 (5 th Cir. 1997), cert. denied, 118 S.Ct. 691 (1998)
Fall 2001/Jurisdictional Cyberlaw/ 139 concepts of jurisdiction by coupling the web site presence with other factors, such as deriving substantial revenue from interstate commerce. Still, the decision makes it clear that earning substantial revenues from Internet advertising may support a finding of long-arm jurisdiction when those revenues result from torts and intellectual property infringements committed against people in other states. C. MISAPPROPRIATION OF INTELLECTUAL PROPERTY/ SPECIFIC JURISDICTION PENDING Desperate to curb DVD piracy, a coalition of motion picture and high-tech heavyweights sued to restrain the circulation of an online program that lets people crack the security on the discs to make unauthorized copies of movies. In DVD Copy Control Association, Inc. v. McLaughlin, 44 the plaintiff claimed that defendants misappropriated intellectual property rights solely licensed by DVD Copy Control Association (CCA), which had its principal place of business in California. Plaintiff claimed further that defendants injured the motion picture industry in California by posting material that allowed copying of copyrighted motion pictures on interactive web sites available to all California users. Plaintiff also claimed that the defendants illegal activities threatened the economic welfare of more than 400 licensees the companies that make the hardware and software that enables consumers to view digital images on DVDs. Eighteen of the twenty-one individual defendants named in the lawsuit were not residents of California. Their connection to the forum state was nothing more than maintaining web sites that provide links to other sites. In arguing for California jurisdiction over the non-resident defendants, the plaintiff claimed that the defendants intentionally launched a direct attack on, not only the plaintiff, but also three of California s largest and most important industries the motion picture industry, the computer industry and the consumer electronics industry by posting proprietary technology on interactive web sites, thereby enabling countless Internet users to make pirated copies of DVD movies. The basis for jurisdiction in the California court was that the heart of the theatrical motion picture and television industry is located there and it would be unreasonable for any defendant to claim it did not know that. 45 Defendants, it was argued, who misappropriate valuable trade secrets and inflict injury on major interests in a state, cannot be left untouchable simply because they chose to conduct their illegal activities on the Internet. To do so, would make the Internet a haven for intellectual property thieves if states were not able to exercise jurisdiction to redress injuries caused by web site activity directed at the state. Based on the effects test approach, the plaintiff claimed these non-residents should be haled into court in California for intentionally harming industries indigenous to that state by providing links on which California residents may click. A preliminary judgment was granted prohibiting defendants from posting the DVD code. A judgment was entered permanently enjoining the defendants from posting their 44 No. CV- 786804; 2000 WL 48512 (Sup. Ct., Santa Clara County, Jan. 21, 2000). 45 Plaintiff s Memo Supporting Motion for TRO and Preliminary Injunction, No. CV - 786804.
140/ Vol. 11/Southern Law Journal computer program that allowed the pirating of copyrighted materials and from linking their site to others. 46 D. TRADEMARK INFRINGEMENT/SPECIFIC JURISDICTION In Bancroft & Masters v. Augusta National, Inc., 47 Augusta National, Inc. (ANI), which sponsors the PGA Masters Golf Tournament, sought to challenge the use of the domain name masters.com by Bancroft & Masters (B & M). A letter was sent by ANI, a Georgia corporation, to the exclusive (at that time) registrar of domain names, Network Solutions, Inc. at its headquarters in Virginia. A letter was also sent to B & M in California where it sells computer and networking products. The letters triggered a dispute resolution policy which gave B & M three options: 1) voluntarily transfer the masters.com domain name to ANI; 2) allow the domain name to be placed on hold, meaning that it could not be used by either party; or 3) obtain a declaratory judgment establishing its right to use the domain name. B & M filed suit in California seeking a judgment declaring non-dilution and noninfringement. In reversing the dismissal of the trial court for lack of personal jurisdiction, the Ninth Circuit Court of Appeals applied the effects test and found that a foreign act with foreseeable effects in the forum state does not give rise to specific jurisdiction without something more. The something more is what the Supreme Court in Calder v. Jones described as express aiming at the forum state. This concept is met when the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state. Applying these concepts, the Ninth Circuit concluded that ANI acted intentionally when it sent its letter to Network Solutions, Inc. The letter was expressly aimed at California because it individually targeted B & M, a California corporation doing business almost exclusively in California. And finally, the effects of the letter were primarily felt, as ANI knew they would be, in According to the court the necessary purposeful availment for a constitutional exercise of specific jurisdiction was demonstrated. There is an interesting concurring opinion in this case. The concurring judges observed that the effects test had normally been restricted to tortious conduct aimed to wrongfully injure the targeted defendant in the forum state. If the evidence on remand shows that ANI acted reasonably and in good faith to protect its trademark against an infringer, there should be no jurisdiction in California. VI. OTHER CASES A. TRADEMARK INFRINGEMENT/SPECIFIC JURISDICTION DENIED In Amberson Holdings LLC v. Westside Story Newspaper, 48 a California-based weekly newspaper was sued for trademark infringement because of its maintenance of a 46 Universal Studios v. Reimerdes, 111 F. Supp.2d 294 (S.D. N.Y. 2000). 47 2000 U.S. App. LEXIS 20917, 223 F.3d 1082 (9 th Cir. 2000). 48 C.A. No. 00-1108 (3 rd Cir. 2000).
Fall 2001/Jurisdictional Cyberlaw/ 141 web site called westsidestory.com. The plaintiffs alleged they hold the trademark for West Side Story and filed suit in New Jersey, claiming that the defendants use of a New Jersey host server established personal jurisdiction. The New Jersey court dismissed the suit for lack of jurisdiction and held that a court s exercise of personal jurisdiction based on a web site depended on the site s degree of interactivity. Fully interactive web sites that allowed business to be conducted over the Internet were always an appropriate basis to exercise in personam jurisdiction. Passive web sites, however, which do not allow information to be exchanged do not establish the degree of minimum contacts required. The federal district judge held access to a [w]eb site reflects nothing more than a telephone call by a district resident to the defendant s computer servers.... Intercomputer transfers of information, which are analogous to forwarding calls to a desired phone number through a switchboard, do not establish sufficient minimum contacts. 49 The web site in question only provided information and the chance to e-mail the company, along with the option to click through to the advertisements of outside vendors. The site did not sell any products, and was essentially nothing more than a passive advertisement. Accordingly, no jurisdiction existed under the interactivity test. B. TRADEMARK INFRINGEMENT/ SPECIFIC AND GENERAL JURISDICTION DENIED In Berthold Types Ltd. v. European Mikrograf Corp., 50 plaintiff, Berthold Types Ltd., was in the business of marketing typefaces bearing distinctive registered trademarks. It filed suit in Illinois against a German company and a California distributor for marketing and selling font software as part of a software package called PDF Handshake, which included font software for over 340 typefaces identified by the Berthold trademarks, without permission or authorization. Defendants only contact with the state of Illinois were visits to a trade show, the sponsorship of an educational seminar in Chicago, and maintenance of an interactive English language web site at www.helios.com. The web site provided comprehensive product presentations and gave customers the ability to download and print a document tiled HELIOS Software Update Service Agreement. A customer could fill out the agreement and submit it to the national dealer/distributor and make a payment. The customer could then access and download files with information about other products. Customers could not purchase Helios products directly off the web site, however, and no commercial transactions took place over the web site. In applying the effects test to the facts of the case, the court held that an Illinois court does not acquire jurisdiction simply because the last act of the tort is an economic loss felt in Illinois. Rather, intellectual property infringement takes place in the state of the infringing sales, rather than the state of the trademark owner s domicile. 49 Cf. Cavaliere & Mulvaney, supra note 2 (citing Bochan v. LaFontaine, 68 F.Supp.2d 692 (E.D. Va. 1999) wherein the court concluded that use of a server in a state was equivalent to committing a tort in the state for purposes of the long-arm statute). 50 No. 99 C 8248 (N.D. Ill. 2000).
142/ Vol. 11/Southern Law Journal Because no orders were taken and no contracts were entered into over the web site there was no valid claim of general jurisdiction over the non-resident defendants in Illinois. The web site was not passive, however, but fell into the middle ground where a user can exchange information with the host computer. The exercise of jurisdiction was ultimately determined by examining the level of interactivity and the commercial nature of the exchange of information. While the Helios site did provide information on ordering products, Helios makes no commercial response to customers submissions. At most, Helios uses the information provided by customers to improve its site and services. Moreover, nothing on the web site was specifically targeted at Illinois consumers. This level of interaction is not sufficient to confer jurisdiction. C. PATENT INFRINGEMENT/SPECIFIC JURISDICTION DENIED In Nutrition Physiology Corp. v. Enviros Ltd., 51 Nutrition Physiology Corporation, a Texas company, filed suit in a federal district court in Texas against Biotal Ltd. and Biotal Inc. claiming that the non-resident defendants were infringing upon NPC s patents by selling products that embodied NPC s patented inventions. Plaintiff asserted that Biotal Ltd. s web site was sufficient to establish minimum contacts with Texas. In an earlier Texas federal district court decision, general jurisdiction had been found when defendant had a web site with a live e-mail link and had made 250 sales in Texas. But in this case, since Biotal made no sales in Texas and consummated no business transactions remotely relating to Texas, other than possibly forwarding e-mail messages to a subsidiary, general jurisdiction was not appropriate. Instead, the court considered specific jurisdiction and applied the interactivity test of Cybersell Inc. v. Cybersell Inc. 52 and 3 D Sys. Inc. v. Aarotech Labs. Inc., 53 to Biotal Ltd. s passive web. The court found the site was insufficient to establish personal jurisdiction in Texas because it did not allow visitors to place orders. Without the something more required under the interactivity test, if a defendant s web site is passive, no personal jurisdiction exists over non-resident defendants since it cannot be established that either purposefully availed themselves of the privilege of conducting business in Texas. D. TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION/ SPECIFIC JURISDICTION DENIED The plaintiff in Uncle Sam s Safari Outfitters Inc. v. Uncle Sam s Army Navy Outfitters-Manhattan Inc. 54 was a Missouri corporation alleging trademark infringement against defendants from New York who were constructing an Internet web site, through which they sought customers from across the country to order items from their online catalogue. The fact that the web site was not fully operational was not persuasive to the 51 No. 5: 99-CV-0107-C (N.D. TX. 2000) 52 130 F.3d 414 (1997). 53 160 F.3d 1373 (1998). 54 96 F. Supp. 919 (E.D. Mo. 2000).
Fall 2001/Jurisdictional Cyberlaw/ 143 court s determination of jurisdiction. In a previous decision, the Missouri court had found jurisdiction in a case in which web site was not yet fully operational, holding that the fact remains that defendants ultimate goal is to operate a fully functioning web site with the capacity to take on-line orders. 55 Because the defendants were operating a potentially interactive web site, the court applied the spectrum approach of Zippo. In applying this test, the court found the nature, quality, and quantity of the contacts generated by the web site minimal. The defendants in this case did nothing more than set up an interactive web site. No evidence existed that anyone from Missouri accessed the web site, let alone attempted to purchase anything over the telephone using the toll-free number provided. In dicta, the court noted that the relationship of plaintiff s cause of action to the contacts might be compelling if there was evidence that anyone from Missouri had accessed the web site as there might have been confusion between Uncle Sam s Army Navy Outfitters and its own Uncle Sam s Outfitters. This would then satisfy the long-arm statute s commission of a tortuous act provision, conferring jurisdiction to the extent allowed by due process. VII. CONCLUSION Courts have struggled with jurisdictional cyberlaw since the mid-1990 s. Despite many opportunities to develop a workable test, the courts seem to be as confused now as they ever were. The Inset case is widely regarded as being revolutionary, and has been much criticized. In the past year, the courts have added additional revolutionary wrinkles in Blakey, Miller, McLaughlin, and Augusta National to this developing field. Still other courts used more traditional tests for personal jurisdiction in cases involving some aspect of the Internet. As the jurisprudence of jurisdictional cyberlaw continues to develop, perhaps the coming year and years will afford more predictability and consistency in this important area of the law. 55 Id.